People Express Airlines was founded in 1980 by Don Burr to take advantage of airline deregulation. It grew rapidly using a low-cost model but faced issues as it expanded too quickly. Management lost focus on providing affordable service and good customer experience. The airline accumulated debt and faced rising costs and competition. To address problems, it needed to refocus on its initial strategy, cut costs through restructuring like selling assets, and improve communication to rebuild its model and reputation.

1. People Express Airlines
• Jason Bloemker
• Skylar Gargan
• Michael Rose
• Rodolph Thermitus
• Elena Sullivan

2. People Express Airlines
An airline that came out of nowhere…
became an instant success…
and disappeared almost as quickly

3. Don Burr -- founder, president, and CEO
- Graduated Harvard Business School – 1965
- President National Aviation Corp – 1972
- Hired by Texas International Airlines 1973
- Airlines was in trouble and Burr helped turn it
around
- President of TI –1979
- Left TI in 1980, because Burr saw TI business
going in different direction than Frank Lorenzo,
CEO

4. Airline Industry Climate and
regulations were changing…
Deregulation in 1979 permitted new entry
Burr saw opportunity for new airline
Joined by Gerald Gittner
People Express was the first to enter the highly
competitive airline industry.
“I cared about staring a new company [to] try and
develop a better way for people to work together…
that where the name People Express came from” –
Burr, 1980

5. Economy was slowing… People were desperate
for jobs
Burr bought cheap, used airplanes and hired
laid-off workers who were willing to accept lower,
nonunion wages
July, 1980: Applied To Civil Aeronautics Board
(CAB)
September, 1980: CAB approves People
Express Airlines application
October, 1980: People Express goes public, and
raises $24 Million
Burr Takes advantage of the Economic Climate

6. Texas International’s
management team to
People Express…
15 of TI’s management joined Burr and Gittner at
their new startup airline
The business model was not based upon
salaries, job descriptions or individual
responsibilities, but more like buddies hanging out
and figuring out what their interest were
We are friends… working together… and oh by the
way
… we’re also running an airline

7. Six Precepts for the New
Organization
1. Service, and a commitment to the growth and
development of its people
2. To be the best provider of air transportation
3. To provide the highest quality of leadership
4. To serve as a role model for other airlines and
businesses
5. Simplicity
6. Maximization of profits

8. Burr’s Strategy:
“Knock the price down
so low that it fills the
plane”
• This would attract business travelers eager to
save money and people who would have
normally driven or taken busses

9. Airline Strategy:
People Express tried a strategy of a uniform low-
price in the mid-Atlantic states in 1981.
They cut costs by adding seats and eliminating all
'frills'. Low cost flying would compete with driving.
Eliminated galleys and first-class to increase number of coach seats
Low-cost Headquarters, Newark, NJ
Burr’s office doubled as their conference room
Bare-bones Terminal
No ticket counters – ticketing was done in-flight
Lean Cost Structure and employee
commitment to continuous improvement

10. Lean Cost Structure
(cont…)
** They created more roomy overhead
compartments where “passengers” could store their
own luggage, saving them time, money and the
inconvenience of lost luggage
Unlike its “frilly” competitors, People Express was just a
means to get from point A to point B
FREE
FOOD
FREE
DRINK
S
CHECK
BAGS
**
SAVE
MONEY

11. Innovative Human Resource
Strategy
Minimal Hierarchy
Everyone was a manager
Self-management
The people at People had to “self-mange”
Job Rotation
Rotation and cross-utilization were necessary for
personal growth
- no one spent to much time at any one role so not to
“complicate” the position
Equity Ownership and Other Compensation
Recruiting
Bright, educated, well-groomed, mature , articulate ,
assertive, ambitious, creative, flexible, energetic,
conscientious, and hardworking

12. Management got blind sided by company’s quick
success and lost their way (cont…)
“we have got a unique problem. We’ve
designed a product which is so popular we
can’t satisfy the demand for it.” _ Burr 1983
Company never took the time to realize why
their customers choose them over other
airlines (they became a leader in that market
segment )
When the company first started its customer knew
that People would take them where they needed to
go cheaper than anyone else.

13. Demand spiked…
Their choice of using the Newark hub to fly out
their airplanes was a very good choice (as their
were a lot of demand for cheaper flight in and out
of the NJ/NY area)
Revenues grew at a rapid pace and management did
not take the opportunity to grow the company’s cash
flow and better prepare themselves for rainy days
As fare wars continued into 1984 and 1985, smaller
airlines like people suffered.
As result an industry consolidation began

14. People Expanding too
Quickly
In a little over two years the company grew from
having…
250 employees to over 3000
Three Boeing 737s to a fleet of 34 planes
Initially, three airports served 24 flights a day
and it grew to 264 nonstop flights daily to 24
destinations
Prior to expansion, People sought to avoid
competition with major airline carriers by focusing
on serving the mid-sized cities (that worked well for
them)

15. External/Internal Problems
mounted
Industry analysts worried about People’s
management team’s ability to find
qualified employees who could cope with
an increasingly complex operation
In early 1982, Gittner resigned
“He did not believe in the strength or our precepts…
He said it was a pipe dream.” –Burr

16. Customers & Employees became unsatisfied
External Customer Issues:
lengthy delays
over booking flights
Internal Employee Issues:
Few opportunities for self-management and
personal growth
Employees were overworked
Flight managers underpaid

17. Expansion (cont.)
Despite mounting problems within the company
and uncertainty in the industry, People Express
Airline was expanding at a very rapid pace
Burr acquired Frontier Airlines out of Denver by
outbidding his former boss Frank Lorenzo.
Frontier was poor business investment:
Already loosing business
Now operating in a totally new city

18. Company’s management had no strategy put in
place to stay in control of the mid-sized segment
In 1985, the company almost ran out of cash
after quarter of crushing losses
People Express was mounting a lot of debt, as a
result their interest expense took away a great
percentage of their revenues over 8%
Major airlines started to compete more
aggressively with People Express by offering
lower-fare flight deals to customers

19. SWOT Analysis
Strengths
Financial
Lean cost structure
Lowest cost per available seat mile - $0.05
84% load factor compared to industry 60%
Low fuel costs
Human Resources
Employee stock ownership
Recruit service professionals – Nurses, Social
Workers, etc.
Employee profit sharing

20. SWOT Analysis
Strengths Cont.
Technology/Equipment
One fleet type – Boeing 737 saved on fuel, training,
maintenance.
Weaknesses
Financial
Avoided additional revenue by refusing cargo
shipments
Human Resources
Overworked employees
Understaffing
Difficult recruiting standards
Management Hierarchy

21. SWOT Analysis
Weaknesses Cont.
Marketing
Fees for checked bags
“Nickel and diming” viewed as “cheap”
No hotel or rental car
Overbooking and lengthy delays
Baggage delays
Technology
Issues with customer reservation system

22. SWOT Analysis
Opportunities
Flexibility in the workforce by cross-utilization
Able to undercut competitors by the low cost
structure
Ability to appeal to customers who might normally
drive or take a bus
Continuing addition of aircraft allowed service to
new routes
Deregulation in the airline industry reduced
barriers to entering the market and government
regulation.

23. SWOT Analysis
Threats
Financial
Employees gain seniority and require wage
increases
Predatory actions by competitors in price war
Human Resources
Donald Burr’s large ego
Understaffing/overworking creates unhappiness
Low employee morale
Employees desired unionization like other airlines
External Conditions
Fuel price increases
Recession
Accident/Crash

24. Strategy and Alternatives to
Address People Express’ key
Problems
Refocus:
People Express lost sight of their initial goal of
offering excellent service at an affordable price
People’s initial strategy to let the employees
manage themselves is counter-intuitive to running
a successful business because it lacks
organizational structure
People needs to take control of its financials
Their losses (debt position) are increasing at a
rate which it cannot control

25. Management need to improve their cash position
and cut down on their spending
delay the expansion of new terminal C in Newark
Cut out the businesses that are not profitable
SELL FRONTEIR AIRLINES
Refocus: cutting costs and becoming efficient
again

26. Restructuring the business
To cut cost and expense, People must sell some
of their airplanes and use this money to pay off
outstanding debt and to invest in rebuilding its
business model.
They need to reduce flight frequency, especially
those which are not so profitable
People needs to re-implement a general internal
training program to retrain employees and
reinforce the company’s strategic plan and goals
Communication between its employees and
customers needs to be improved

27. Creating Profit
People Express can still be a leader in the
market segment that they started
They need to go back to the basic by
providing customer the best experi-
ence at the lowest cost
By using smaller aircrafts on short flights to smaller
cities that weren't reachable by major carriers made
the company very profitable. (The Newark hub served
that purpose)

28. Keeping Track
Management at the company should provide
customer/employee a platform to communicate (they should
also take very strong measures in keeping their stakeholders
happy
Pay close attention to the financial statements
Keep control of customer traffic such as ticket sales
Hire the best financial managers that they can
Make sure that the board consists of people from diversified
backgrounds
Pay close attention to how investor react to the company’s
stock